| 5. Convertible Notes Payable | 5. Convertible Notes Payable Convertible notes payable consisted of the following at April 30: 2015 2014 Note payable, no interest, convertible into common stock of the Company at $0.05 per share $ 11,000 $ 36,000 Note payable, no interest, convertible into common stock of the Company at $0.10 per share 90 days from demand 141,150 141,150 Note payable, no interest, convertible into common stock of the Company at $0.10 per share on a quarterly basis 14,500 - Note payable to institutional investor, with interest at 8% per annum, convertible into common stock of the Company at defined conversion price, maturing on September 5, 2015 38,000 - Note payable to institutional investor, with interest at 8% per annum, convertible into common stock of the Company at defined conversion price, maturing on December 4, 2015 16,000 - Note payable to institutional investor, with interest at 8% per annum, convertible into common stock of the Company at defined conversion price - 42,500 Note payable, no interest, convertible into common stock of the Company at $0.125 per share, imputed interest at 9% per annum - 100,000 Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share - 25,010 Other, with interest at 6% per annum 9,000 9,000 Less discount (29,902) (30,881) $ 199,748 $ 322,779 The convertible notes payable with balances of $11,000 and $141,150 at April 30, 2015 were convertible 30 days from the first day the Companys common shares are qualified for trading on the OTC Bulletin Board, which occurred in November 2012. As of April 30, 2015, these convertible notes had not been converted and therefore were in default. On May 4, 2014, the Company issued 800,000 shares of its common stock in the conversion of the $100,000 convertible note payable. On May 4, 2014, the Company issued 1,000,000 shares of its common stock in the conversion of the $25,010 convertible note payable, $25,000 of the $36,000 convertible note payable, and $2,406 in accrued interest payable, recognizing a gain on settlement of debt of $2,416. On February 13, 2014, the Company entered into a convertible promissory note with an institutional investor (Investor) for $42,500, which bears interest at an annual rate of 8% and matures on November 18, 2014. The Investor has the right, after the first 180 days of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 58% (representing a discount rate of 42%) of the average of the lowest three trading prices for the Companys common stock during the ten trading day period ending one trading day prior to the date of the conversion notice. At any time for the period beginning on the date of the note and ending on the date which is 30 days following the date of the note, the Company may prepay the note upon payment of an amount equal to the outstanding principal multiplied by 120%, together with accrued and unpaid interest. The amount of the prepayment increases every subsequent 30 days to 125%, 130%, 135%, 140% and 145% of the outstanding principal together with accrued and unpaid interest. After the expiration of 180 days following the date of the note, the Company will have no right of prepayment. At the inception of the convertible note to institutional investor, the Company recorded debt issuance costs of $2,500 in prepaid expenses, a debt discount of $42,500 and a derivative liability of $52,962 related to the conversion feature. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note. On August 21, 2014, the Company issued 68,966 shares of its common stock in the conversion of $12,000 principal of the convertible note payable to institutional investor. The Company repaid the remaining principal balance of $30,500 in November 2014. On December 3, 2014, the Company entered into a convertible promissory note with an institutional investor for $38,000, which bears interest at an annual rate of 8% and matures on September 5, 2015. The investor has the right, after the first 180 days of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 58% (representing a discount rate of 42%) of the average of the lowest three trading prices for the Companys common stock during the ten trading day period ending one trading day prior to the date of the conversion notice. At any time for the period beginning on the date of the note and ending on the date which is 30 days following the date of the note, the Company may prepay the note upon payment of an amount equal to the outstanding principal multiplied by 120%, together with accrued and unpaid interest. The amount of the prepayment increases every subsequent 30 days to 125%, 130%, 135%, 140% and 145% of the outstanding principal together with accrued and unpaid interest. After the expiration of 180 days following the date of the note, the Company will have no right of prepayment. At the inception of the convertible note to institutional investor, the Company recorded debt issuance costs of $3,000 On March 2, 2015, the Company entered into a convertible promissory note with an institutional investor for $16,000, which bears interest at an annual rate of 8% and matures on December 4, 2015. The investor has the right, after the first 180 days of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 58% (representing a discount rate of 42%) of the average of the lowest three trading prices for the Companys common stock during the ten trading day period ending one trading day prior to the date of the conversion notice. At any time for the period beginning on the date of the note and ending on the date which is 30 days following the date of the note, the Company may prepay the note upon payment of an amount equal to the outstanding principal multiplied by 120%, together with accrued and unpaid interest. The amount of the prepayment increases every subsequent 30 days to 125%, 130%, 135%, 140% and 145% of the outstanding principal together with accrued and unpaid interest. After the expiration of 180 days following the date of the note, the Company will have no right of prepayment. At the inception of the convertible note to institutional investor, the Company recorded debt issuance costs of $500 in prepaid expenses, and a debt discount and derivative liability of $16,000 related to the conversion feature. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note. During the years ended April 30, 2015 and 2014, we had the following activity in the accounts related to the convertible notes to institutional investor: Derivative Liability Debt Discount Gain (Loss) on Derivative Liability Derivative liability at inception of the note $ 52,962 $ 42,500 $ (10,462) Loss on derivative liability 10,397 - Amortization of debt discount to interest expense - - Balance at April 30, 2014 63,359 30,881 $ (20,859) Issuance of convertible notes 83,393 53,326 $ (30,069) Gain on derivative liability (53,257) - 53,257 Conversion of debt to shares of common stock and repayment of debt (45,687) (3,842) Amortization of debt discount to interest expense - - Balance at April 30, 2015 $ 47,808 $ 29,902 $ 23,188 The estimated fair value of the derivative liability at April 30, 2015 was calculated using the Black-Scholes pricing model with the following assumptions: Risk-free interest rate 0.06% - 0.15% Expected life in years 0.35 0.60 Dividend yield 0% Expected volatility 111.34% - 133.37% Accrued interest payable was $2,383 and $3,501 at April 30, 2015 and 2014, respectively. |
